Free Markets, Free People

Economy

Obama’s emerging mid-term strategy underscores his inability to lead

I mentioned, a week or so ago, that it appeared the developing strategy the White House was going to use in the 2010 midterm elections was to again try running against Bush.  The brain-trust behind this idea seems to think it will give President Obama the ability to “ride the wave of anti-incumbency by taking on an unpopular politician steeped in the partisan ways of Washington”.  Except the most obvious partisan these last 16 months is Obama and he, in case he hasn’t noticed, is the “incumbent”.

I think Politico and Merle Black pretty much have it figured out when it comes to this sort of a strategy:

It’s a lot to ask an angry, finicky electorate to sort out. And even if Obama can rightfully make the case that the economy took a turn for the worse under Bush’s watch, he’s already made it – in 2008 and repeatedly in 2009.

It’s not clear that voters still want to hear it.

“If you’re the leader of a large corporation and you’re in power for a year and a half and you start off a meeting with your shareholders by blaming your predecessor, that wouldn’t go over very well,” said Merle Black, a political science professor at Emory University. “This is a very weak approach. … And I can’t imagine it having an impact on these very swing voters.”

Spain Admits “Green Jobs” Program A Disaster

Eventually, no matter hard one tries to wish it away, reality will smack you in the face. Hard.

As predicted was inevitable, today the Spanish newspaper La Gaceta runs with a full-page article fessing up to the truth about Spain’s “green jobs” boondoggle, which happens to be the one naively cited by President Obama no less than eight times as his model for the United States. It is now out there as a bust, a costly disaster that has come undone in Spain to the point that even the Socialists admit it, with the media now in full pursuit.

[...]

La Gaceta boldly exposes the failure of the Spanish renewable policy and how Obama has been following it. The headline screams: “Spain admits that the green economy as sold to Obama is a disaster.”

According to the Spanish government, the policy has been such a failure that electricity prices are skyrocketing and the economy is losing jobs as a result (emphasis added):

The internal report of the Spanish administration admits that the price of electricity has gone up, as well as the debt, due to the extra costs of solar and wind energy. Even the government numbers indicate that each green job created costs more than 2.2 traditional jobs, as was shown in the report of the Juan de Mariana Institute. Besides that, the official document is almost a copy point by point of the one that led to Calzada being denounced [lit. "vetoed"] by the Spanish Embassy in an act in the U.S. Congress.

The presentation recognizes explicitly that “the increase of the electric bill is principally due to the cost of renewable energies.” In fact, the increase in the extra costs of this industry explains more than 120% of the variation in the bill and has prevented the reduction in the costs of conventional electricity production to be reflected on the bills of the citizens.

[Translation of Spanish article provided by Chris Horner]

Despite these facts, which quite frankly have been known for quite some time, the Obama administration is still planning to move ahead with its own policy based explicitly on the Spanish one. As Horner states:

That fight [over the "green economy" policy] begins anew next week with the likely Senate vote on S.J. Res. 26, the Murkowski resolution to disapprove of the Environmental Protection Agency’s attempt to impose much of this agenda through the regulatory back door without Congress ever having authorized such an enormous economic intervention.

Just as with the ObamaCare boondoggle that was rammed into law despite its (a) known problems that are only now being admitted to, (b) real costs that are only now becoming evident, and (c) unacceptability to the vast majority of Americans, Obama is going full steam ahead with this “green economy” nonsense. Regardless of facts or reality, this administration is dead set on re-creating America in the image it likes best (i.e. European social democracy), regardless of the costs. So long as we end up with all the bells and whistles that are the hallmarks of our European betters (e.g. universal health care, carbon taxes, depleted military, enhanced welfare state, overwhelming government controls of the economy, sufficiently apologetic “transnationalist” foreign policy), the actual results of that transformation are unimportant. We may end up an economic basket case a la Greece, but hey, at least we’ll have all the nanny-state accouterments necessary to commiserate with the cool European kids.

It’s gotten to the point where pointing out that the emperor has no clothes only results in naked orgies of Utopian spending. This cannot end well.

[HT: InstaDriscoll]

Guess what unexpectedly rose again?

If you said jobless claims, you’d be right:

Initial claims for state unemployment benefits increased 25,000 to a seasonally adjusted 471,000 in the week ended May 15, the highest level since the week ended April 10, the Labor Department said.

Analysts polled by Reuters had expected claims to fall to 440,000 from the previously reported 444,000, which was revised marginally up to 446,000 in Thursday’s report.

The four-week moving average of new claims, which is considered a better measure of underlying labor market trends, rose 3,000 to 453,500.

To give you an idea of what the nation is facing in unemployment, a little chart to make the point:

Remember, President Obama continues to claim that without his pork laden “stimulus” package (something the “party of ‘no'” voted against as a bloc), things would have been much, much worse. Really?

And also remember that when he touted that “stimulus” he promised it would halt the unemployment slide at 8%.  I assume the GOP sees his strategy, given the numbers and the promised results as an effective counter to his claim the “stimulus” worked.

On a non-political note, this week’s claims simply point out that we still have a long way to go before we begin to see a steady improvement in the unemployment rate.  And, with the European crisis festering, we may see it get worse again, before it gets better.

~McQ

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Forgive the schadenfreude

I just can’t help it – not that this is surprising or unexpected.

Venezuela’s economy is in trouble despite the country’s huge oil reserves. Blackouts plague major cities. Its inflation rate is among the world’s highest. Private enterprise has been so hammered, the World Bank says, that Venezuela is forced to import almost everything it needs.

This is socialism working again. Yes, yes, we’ll hear the naysayers claim that it “really isn’t socialism”, but of course, it is and, like all other attempts throughout the world and history, it is a dismal failure which has made the lives of the citizens of Venezuela worse, not better. Venezuela’s economy has contracted 3.3% in the past year.

Jose Guerra, a former Central Bank economist, says state intervention in private businesses is hitting the economy hard.

“The government is nationalizing, expropriating, or confiscating,” he says. “They are not creating new wealth; this is wealth that was already created.”

And, as expected, the government is badly mismanaging what it confiscates and nationalizes. Cities endure 4 hour blackouts daily, many during business hours.

This is not the way it was supposed to be. Venezuela is one of the world’s great energy powers. Its oil reserves are among the world’s largest and its hydroelectric plants are among the most potent.

But these days, Venezuela is being left behind: The rest of Latin America is expected to grow at a healthy rate this year, according to the World Bank.

Guerra, the former Central Bank economist, says the government must reconsider its policies — and drop the statist socialist model that Chavez adopted.

“The government has to consider that the socialist point of view is not so good for the economy,” Guerra says. “Chavez believes in the old-fashioned socialism. This kind of socialism is dead, definitely dead, it doesn’t apply to any country in the world.”

Of course it should be “dead, definitely dead” to the world, but it isn’t. Ignorant people like Chavez always believe that the myth of socialism and the supposed “social justice” it promises are workable solutions to what are the inequities and unfairness they see in a capitalist system. And when they finally grab power, they attempt to impose the promises of the myth with predictable results.

Of course, when committed this deeply, you don’t expect such a person to admit they’re wrong, but, instead to double down. Hugo Chavez doesn’t disappoint:

In a recent speech, Chavez acknowledged the economic troubles, but he said he wasn’t worried.

Instead, he spoke of a worldwide capitalist crisis, which he said provided a marvelous opportunity for Venezuela to push a new model.

Oh yeah, given the wreck that was Venezuela’s economy before the “capitalist crisis”, I’m sure there are untold numbers of countries just can’t wait to sign on to the “Venezuelan model” and all it promises:

The grill at Landi Nieto’s burger joint still works: It runs on gas. But customers eat in the dark, Nieto says, if they venture out at all in the first place.

~McQ

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Cap-and-tax: The game plan to make it a reality

The Environmental Protection Agency (EPA) has decided it has waited long enough for Congress to do something about greenhouse gasses (GHG).  So the unelected bureaucracy has decided it will take matters into its own hands and regulate GHG itself:

Starting in July 2011, new sources of at least 100,000 tons of greenhouse gases a year and any existing plants that increase emissions by 75,000 tons will have to seek permits, the agency said.

In the first two years, the E.P.A. expects the rule to affect about 15,550 sources, including coal-fired plants, refineries, cement manufacturers, solid waste landfills and other large polluters, said Gina McCarthy, the agency’s assistant administrator.

She said the rule would apply to sites accounting for about 70 percent of the nation’s greenhouse gas emissions. “We think this is smart rule-making, and we think it’s good government,” she said.

Now you can call it “smart rule-making” or “permitting” or any of a number of nifty things, but in reality the cost of regulatory compliance and the cost of permitting will increase the cost of operation – a cost that will be passed on to the consumer.

Of course, EPA Administrator Lisa Jackson, the unelected administrator making this decision, is pretty sure that this is a wonderful way to “spark clean technology innovation” and save the planet “for the children”:

“After extensive study, debate and hundreds of thousands of public comments, EPA has set common-sense thresholds for greenhouse gases that will spark clean technology innovation and protect small businesses and farms,” said EPA Administrator Lisa P. Jackson. “There is no denying our responsibility to protect the planet for our children and grandchildren. It’s long past time we unleashed our American ingenuity and started building the efficient, prosperous clean energy economy of the future.”

Question: Does anyone think “American ingenuity” hasn’t been “unleashed” on the clean energy problem?  With the potential payoff, obviously it has.  Instead, what this does is what the President said he wanted to do prior to taking office during an interview – it begins the process of raising conventional power generation to a cost level that makes “clean power” seem less expensive by comparison.  And if Congress won’t do it, hey, that’s what activists turned “administrators” are for – interpret the Clean Air Act as it has never been interpreted before and serve the agenda.

Of course you don’t have to “question the timing” at all – consider it all part of the orchestration plan for providing the impetus necessary to pass the Kerry-Lieberman.  Manufacture a “crisis”, provide a government solution:

Senator John Kerry, a Massachusetts Democrat and one of the two sponsors of the climate bill, seized on Thursday’s announcement to argue for the urgency of passing it. “Today we went from ‘wake-up call’ to ‘last call,’ ” he warned in a statement.

Heh … nothing obvious about this at all. Make the case that the EPA is usurping the prerogative of Congress and you’re sure to attract bi-partisan support on that. But, of course, that can’t mean just passing simple legislation stripping the EPA of that power can it? Lisa Murkowski (R-AK), the ranking Republican on the Senate Energy and Natural Resources Committee has actually introduced a disapproval resolution to do that, but with 35 Republican and only 3 Democrats, it has little chance of passing.

Murkowski says this will cause “an economic train wreck” if allowed to go into effect. With it targeting what’s left of “big manufacturing” and, of course, the majority of conventional power generation – in the middle of a deep recession – it’s hard to argue she’s incorrect.

More of your government at work trying to lessen the economic impact of the recession and create more jobs. /sarc

~McQ

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John Kerry was for off-shore drilling before he was against it

Senator’s John Kerry and Joe Lieberman introduced their 1,000 page climate change bill yesterday.  Unfortunately, “The Hill” only deals with the political aspects of the bill and doesn’t tell us much about what it contains.  Of interest was this:

The bill has the support of the Edison Electric Institute, a large trade group that represents for-profit utilities, and encouraging statements also poured in from companies including GE, although, like many, the company hedged slightly and said it “supports the process” that Kerry and Lieberman initiated.

Oil giant Shell issued a supportive statement, and Kerry also cited support from BP and ConocoPhillips. The bill’s method for addressing transportation-sector emissions is more to the liking of some refiners, who bitterly opposed the House climate change bill that passed last year.

The point, of course, is these companies are settling for the lesser of two evils.  And, of course, there’s a bit of crony capitalism thrown in for good measure.  I, on the other hand,  oppose the imposition of any carbon buying scheme (tax) until I see a lot more conclusive science saying we have a warming problem caused by CO2.

Anyway, as to the title, IBD covers that:

The bill, authored by Sens. John Kerry, D-Mass., and Joe Lieberman, I-Conn., would let a state ban drilling within 75 miles of its coastline vs. 3 miles currently.

A state also would be able to veto neighbors’ drilling projects if a mandatory study indicated that an accident could harm the state’s economy or environment.

This is a major reversal from late ’09, when Kerry called for a bill that included “additional onshore and offshore oil and gas exploration.”

This is also not just something the John Kerry does.  This is the nature of the beast.  Reactive legislation done in hast and in the shadow of a current problem which usually ends up being poorly thought out and ends up actually doing more harm than good.  Unfortunately, that’s politics today.

The bill aims to cut carbon emissions by 17% below 2005 levels by 2020. It includes cap-and-trade programs for the manufacturing and power-generating sectors and a cap for the transportation sector.

The bill would affect about 70% of the economy, staffers said. They declined to estimate the total cost.

Of course they did – and we’ll all trust the CBO numbers when they come out too – or should we wait for V 2.0 before we agree to the cost?  Bottom line here is if the cap-and-trade program includes “manufacturing and power-generating sectors” the impact will be 100% unless you can point to a sector of our economy that doesn’t use power.

But again, this is the usual way this works – understate the impact, blow off the rebuttals and stick with your estimate hopefully bolstered by gaming the CBO.

Really though – the economy is the number one priority of the people and these yahoos are thinking it is a good idea to introduce a tax that will effect 100% of the economy based on dubious science?

There is some hope though:

A year ago, Reid said passing healthcare reform was simpler than moving an energy bill: “This may surprise some people, but I think healthcare reform is easier than all this global warming stuff.”

I sure as hell hope so.  It certainly would be fun to watch Democrats again ignore the priorities of the electorate (economy, jobs) and go after one of their favorite agenda items.  Fodder for Republicans in November – and frankly, I don’t think they have a chance of passing this before then, or, as a matter of fact, afterwards either.

So go for it Dems – you’ve hooked your electoral wagon to a team of wonderful horses – Kerry and Lieberman – and (tongue in cheek) you deserve everything this ends up getting you.

~McQ

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Unemployment: And the good news is ….

We added jobs last month.  In fact, according to Reuters we added more to US nonfarm payrolls than we have in 4 years.

290,000 jobs were added in April (66,000 government and the rest private sector).   What this points to is a number that is higher than that which is necessary to keep the unemployment percentage stable (around 140,000 a month) because of the natural turbulence within the jobs market.

On the other hand, with some adjustments, the unemployment rate itself went up .02 percentage points to 9.9% (Reuters mistakenly claims it stayed at 9.7%).

Now this is unquestionably good news.  However, given that 8.2 million jobs have been lost in the recession, a few thousand a month increase isn’t going to change the unemployment rate drastically any time soon.  Most see that rate coming down very slowly over years.  And, as the bad news in Europe continues to grow and markets for American goods there decline,  it is entirely possible that it will flatten out again or even spike a bit before it heads back down.

~McQ

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Ed Morrissey nails it

Take a look at this little blurb from President Obama’s speech in Quincy IL:

We’re not, we’re not trying to push financial reform because we begrudge success that’s fairly earned. I mean, I do think at a certain point you’ve made enough money. But, you know, part of the American way is, you know, you can just keep on making it if you’re providing a good product or providing good service. We don’t want people to stop, ah, fulfilling the core responsibilities of the financial system to help grow our economy.

Ed latches on to those two highlighted lines to deliver a great rebuttal:

He should have stuck with the TelePrompter. The President doesn’t get to decide when people have “made enough money.” In fact, as the radio host notes, that’s a statist point of view. Furthermore, the responsibility of an entrepreneur isn’t to “grow our economy,” core or otherwise. It’s to grow his own economy. In a properly regulated capitalist system, the natural tension of self-interests create economic growth through innovation and efficient use of capital and resources.

Bingo – well said, old friend.

~McQ

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Welfare State In Crisis

The bailout of Greece may not work. Spain is teetering on the edge of serious financial doom. The Euro is taking a beating. And the banks of Europe are not looking too healthy overall. Meanwhile, here in the States, unfunded government debt, already expanding at an unprecedented rate, is set to explode. What do all of these things have in common? They are the direct result of expanding the welfare state without any means of actually paying for all of it.

In truth, there is never a way to pay for expanding the welfare state because, while wealth creation isn’t a zero-sum game, the population of wealth-creators is; after all, not just anyone can create electricity, telephones, heart medications, MicroSoft, Wal-Mart, or even pencils without some know-how, sweat and inspiration. If that were possible, then wealth creation could never be retarded, regardless of the impediments. Some wise, noble, and completely selfless individual would always emerge to drive the economy forward. Alas, self-interest trumps all, without which wealth-creation is for the horses.

No matter how ingenious the plan, or divine the motives, the only way for governments to fund the welfare state is to tax the wealth-creators. As even the most Marxist of intellectuals knows, if you want less of something, then tax it. This is why cigarettes are levied against in ridiculous proportions, and why carbon taxes are considered (by some) to be the savior of our planet. Well, taxing wealth-creation works exactly the same way: tax it more, and you will get less of it. Which leads to the inexorable conclusion that, as the governments of the world sink deeper into fiscal crisis, the looters will be coming en masse.

Does that mean that we are in for another Great Depression? Not necessarily. In fact, I predict that no such thing will occur. For starters, we have many institutions in place today that didn’t exist in the 1930’s such as the FDIC, Social Security, Medicare, the IMF, and the World Bank. Some of these things are arguably beneficial in that they smooth out the rough patches that economies inevitably encounter. The U.S. economy, for example, may not have realized the devastation it did if old people, like McQ, could have survived without taxing their families’ resources so much, or the FDIC had been in place to quell bank runs. Maybe. But more importantly, in this day and age our politics and law-making bodies (and those of every democratic society) are dominated by those whose own self-interest is firmly grounded in the ability to buy votes. That ability is highly dependent upon feeding the welfare state, since the vast majority of votes are bought from those who don’t create electricity or heart medications. This is why politicians of all stripes won’t take steps that would decrease the welfare state, because to do so will cost them votes — to the politician who promises more largesse at the expense of whatever hated rival is being villainized at the time. Accordingly, the odds are rather stacked against wealth-creators continuing to employ their skills in service of the very state that punishes them.

Instead of the Great Depression, Part Deux, I would predict that the elites (those, and their friends, who hold the power to dole out goodies for votes) will shuffle the deck just enough to ensure that they stay in favor, while allowing the overall health of the economy to softly fade into oblivion. They are like Dr. Kevorkian administering to capitalism. The ability to create wealth will slowly continue to be arrogated to the governors and “experts,” while the welfare state expands in decrescendo. Eventually, we will be left with something akin to the Ottoman Empire: all power and glory in name only, inside a rotting shell, harkening back to a time so dissimilar as to be unworthy of the title. What’s left will be hopeless, farcical and cruel, and will not have the slightest ability to nurture the welfare state that started it all. Perhaps the “Long Morose” would be a better title.

Irrespective of my gloomy predictions, there simply isn’t any question that, at some point, the beneficiaries of the great welfare state will have to take a bath. Most likely, that day will come when everyone jumps in the tub together. Until that time, prepare for the politically powerful to loot the wealth-creators out of existence in order to pay off the welfare beneficiaries. Eventually the only ones left to take that bath will be the filthy and the unwashed.

More debt pressure on Europe…and US business

Following yesterday’s announcement that Greek debt was downgraded to junk status, today Spain’s debt was downgraded as well. Spain is, in many ways the bellwether for Europe’s debt crisis. Spain has a much larger economy than Greece. So large, in fact, that it may be too big to bail out.

Fortunately, Spain’s debt is still less than 60% of GDP; however, the country is on a reckless fiscal path and the government shows no signs of doing anything about it.

As a result of the growing crisis, the Euro is getting hammered in the FOREX market, while the dollar is soaring. This is, in effect, an interest rate hike for US businesses that export to the Euro zone.

Naturally, this places downward pressure on US export sales at a time where the overall business climate is still weak. So, none of this is good news for the American economy, either.